Volume 72, Number 118, Page 34043-34044

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DEPARTMENT OF LABOR
Employee Benefits Security Administration
Hearing on Computer Model Investment Advice Programs for IRAs
AGENCY: Employee Benefits Security Administration, U.S. Department of
Labor.
ACTION: Notice of hearing.
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SUMMARY: Notice is hereby given that the Department of Labor will hold
a hearing regarding the feasibility of the application of computer
model investment advice programs for Individual Retirement Accounts and
similar types of plans.
DATES: The hearing will be held on July 31, 2007 beginning at 9:30
a.m., EST.
ADDRESSES: The hearing will be held at the U.S. Department of Labor,
Rooms N-4437B, C and D, 200 Constitution Avenue, NW., Washington, DC
20210.
FOR FURTHER INFORMATION CONTACT: Chris Motta, Office of Exemption
Determinations, Employee Benefits Security Administration, U.S.
Department of Labor, telephone (202) 693-8540 (this is not a toll-free
number).
SUPPLEMENTARY INFORMATION: Section 601(b) of the Pension Protection Act
of 2006 (the PPA) (Pub. L. 109-280) amended section 4975 of the
Internal Revenue Code of 1986 (the Code) to add an exemption from
certain taxes imposed by the Code for the provision of ``investment
advice'' to participants and beneficiaries of covered employee benefit
plans, and certain related transactions, if the investment advice is
provided under an ``eligible investment advice arrangement.'' \1\ One
such arrangement involves the use of a computer model which meets the
requirements of the exemption.\2\ The
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PPA directed the Secretary of Labor, in consultation with the Secretary
of the Treasury, to solicit information regarding the feasibility of
the application of computer model investment advice programs to
Individual Retirement Accounts and similar types of plans (hereinafter,
collectively, IRAs).\3\ The PPA further directed that the Secretary of
Labor, in consultation with the Secretary of the Treasury, determine,
based on the information received from the solicitation, whether there
is any computer model investment advice program which may be utilized
to provide investment advice to IRA beneficiaries, where such program:
(1) Utilizes relevant information about the account beneficiary, which
may include age, life expectancy, retirement age, risk tolerance, other
assets or sources of income, and preferences as to certain types of
investments; (2) takes into account the full range of investments,
including equities and bonds, in determining the options for the
investment portfolios of the beneficiary; and (3) allows the
beneficiary, in directing the investment, sufficient flexibility in
obtaining advice to evaluate and select investment options[0].
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\1\ See Code section 4975(d)(17). The PPA also amended section
408 of the Employee Retirement Income Security Act of 1974 (ERISA)
to add a parallel exemption from certain prohibited transaction
restrictions of ERISA.
\2\ See Code section 4975(f)(8)(C)(ii). The computer model must:
(1) Apply generally accepted investment theories that take into
account the historic returns of different asset classes over defined
periods of time; (2) utilize relevant information about the
participant, which may include age, life expectancy, retirement age,
risk tolerance, other assets or sources of income, and preferences
as to certain types of investments; (3) utilize prescribed objective
criteria to provide asset allocation portfolios comprised of
investment options available under the plan; (4) operate in a manner
that is not biased in favor of investments offered by the fiduciary
adviser or a person with a material affiliation or contractual
relationship with the fiduciary adviser; and (5) take into account
all investment options under the plan in specifying how a
participant's account balance should be invested and not be
inappropriately weighted with respect to any investment option.
\3\ See PPA section 601(b)(3)(A)(i). These plans are: (1) An
individual retirement account described in section 408(a) of the
Code; (2) an individual retirement annuity described in section
408(b) of the Code; (3) an Archer MSA described in section 220(d) of
the Code; (4) a health savings account described in section 223(d)
of the Code; (5) a Coverdell education savings account described in
Code section 530; or (6) a trust, plan, account, or annuity which,
at any time, has been determined by the Secretary of the Treasury to
be described in any preceding subparagraph of this paragraph
[i.e.,(1) through (5) above].
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On December 4, 2006, the Department of Labor published a request
for information (RFI) regarding the feasibility of computer model
investment advice programs for IRAs (71 FR 70427). On December 12 and
13, 2006, the Department solicited comments, by mail, from certain
trustees and other persons offering computer model investment advice
programs. The Department received over 60 comments in response to these
solicitations.
The RFI posed several questions that focused on the specific
statutory requirements imposed by the PPA for computer model investment
advice programs for beneficiaries of IRAs. Many of the comments took
differing views as to the existence of such programs depending on the
meaning of the term ``full range of investments'' in PPA section
601(b)(3)(B).
After carefully reviewing the information received to date, the
Department has decided that it would be beneficial to solicit
additional information by means of a public hearing. The Department is
interested in obtaining information on all aspects of computer model
based investment advice programs for IRAs that would help in making the
required determination, including additional information relating to
the questions posed in the RFI. In particular, the Department is
interested in understanding what particular types of investments or
asset classes a computer model program should take into account in
order to provide appropriate advice to IRA beneficiaries. In addition,
the Department seeks additional information on the manner in which such
programs could operate without bias as to investments offered by the
fiduciary advisor or an affiliate, if the particular advice program
allocates IRA assets among only such investments.
The Department is also interested in knowing whether the scope of
relief from ERISA's prohibited transaction provisions afforded by the
statute is adequate to facilitate the use of computer-based programs
for IRAs should the Department determine that such programs are
feasible. Conversely, the Department seeks information concerning the
scope of relief that would be necessary, and the conditions that would
be appropriate, if it were necessary to issue the class exemption
described in PPA section 601(b)(3)(C)(ii).
The hearing will be held on July 31, 2007 beginning at 9:30 a.m.,
EST, in Rooms N-4437 B, C and D at the U.S. Department of Labor, 200
Constitution Avenue, NW., Washington, DC. Any interested person who
wishes to be assured of an opportunity to present oral comments at the
hearing should submit by 3:30 p.m., EST, July 19, 2007: (1) A request
to be heard; and (2) a copy of an outline of the topics to be
discussed. To facilitate the receipt and processing of responses, EBSA
encourages interested persons to submit their request and outline
electronically either: (1) By e-mail to e-OED@dol.gov; or (2) by using
the Federal eRulemaking portal at http://www.regulations.gov (follow
the instructions for submission of comments), using docket number:
EBSA-2007-0021. All requests and outlines submitted to the Department,
including those submitted by e-mail, will be posted on
http://www.regulations.gov in the above-referenced docket. Persons submitting
requests and outlines electronically are encouraged not to submit paper
copies. Persons interested in submitting written requests and outlines
on paper should send or deliver their requests and outlines to the
Office of Exemption Determinations, Employee Benefits Security
Administration, Room N-5700, U.S. Department of Labor, 200 Constitution
Avenue, NW., Washington, DC 20210, Attention: Computer Model Investment
Advice Programs For IRAs--Hearing. The Department will prepare an
agenda indicating the order of presentation of oral comments. In the
absence of special circumstances, each commenter will be allotted
fifteen minutes in which to complete his or her presentation.
Information about the agenda will be posted on or after July 25, 2007
on http://www.regulations.gov in docket number: EBSA-2007-0021 or may be
obtained by contacting Chris Motta, Office of Exemption Determinations,
Employee Benefits Security Administration, U.S. Department of Labor,
telephone (202) 693-8540 (this is not a toll-free number). Those
individuals who make oral comments at the hearing should be prepared to
answer questions regarding their comments. The hearing will be
transcribed.
Signed at Washington, DC, this 14th day of June, 2007.
Ivan L. Strasfeld,
Director, Office of Exemption Determinations,Employee Benefits Security
Administration,U.S. Department of Labor.
[FR Doc. E7-11885 Filed 6-19-07; 8:45 am]
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